Case Study: Glassdoor's "Best Places to Work" Outperformed the Market by 2X
Everyone has their own unique investing theses, and this one could actually be a winner.
Hi there! I hope your week has been off to a great start. For those younger folks who are now back in school for the Spring semester – good luck!
Introducing Glassdoor & Their ‘Best Places to Work’ List
If you’ve ever been in the market for a new job, you’ve likely heard of the company Glassdoor. Essentially, they’re a website that shares detailed statistics about most companies – both public and private. This includes their employees’ feedback about the CEO, employee salary ranges, and the interview process.
It’s essentially a playbook for getting the job and pay you want.
Every year, Glassdoor releases a ranking they like to call “Best Places to Work” based on data collected from employees. This feedback from employees encompasses their review of their role, work environment, and employer overall. Here’s a link that shares a lot more data behind the rankings.
What does it have to do with my portfolio?
I’m glad you asked.
What if I told you that the companies celebrated by employees as the best places to work are also some of the best-performing investments in the public markets?
Sounds a bit too good to be true. Pick companies based on employees that enjoy working for them over fundamental analysis? Sure, evaluating a company on quality leadership / management is valid – and employee satisfaction certainly reflects their success (to an extent). But that doesn’t mean that this is a viable investment strategy.
Well you’re right – it’s not. This post is a simple explanation and breakdown of data I found on Seeking Alpha that showed a clear correlation between rising stock prices and “Best Places to Work” placements.
I mean let’s be real for a second – this does make complete sense. If you’re a top-tier data scientist, software engineer, or software salesman for a company – you’re going to want to work for a good company. A company who you believe will treat you with respect, compassion, and offer upward mobility when the time is right.
One of the first places you’d likely go to find that information is Glassdoor – a trusted name considering that an abundant amount of feedback from employees is completely anonymous.
On the flip side, recruiting talent is hard. The world is accelerating toward digital, which means hiring exponentially more employees that know how to code and build software. Folks that excel in these critical skill sets aren’t growing on trees, and elite talent is being recruited by Apple, Facebook, Microsoft, etc.
Having a good company review on Glassdoor, like this one from Salesforce, might help your recruiting efforts.
To put the cost of recruiting these individuals in perspective – I’m familiar with bounties of over $10,000 paid to you if you refer someone who accepts a job offer. If a company is willing to happily fork over $10,000 for your painless introduction - imagine the true cost of recruiting someone of this caliber.
Now that we’re all on the same page, let’s look at the data.
The Best Place to Work & Best Performing Stock?
To set the stage, we first must understand this – investing in single stocks is hard. Sure, they’re easy to choose and get excited about, but over a 20+ year time period it’s very hard to choose one that will consistently keep up with the overall market – let alone outperform it.
Only 61% of stocks have shown positive returns over the last 23 years across the market.
Only 36% of stocks have kept up with or outperformed the overall market throughout the last 23 years.
This analyst on Seeking Alpha dove deep into the “Best Places to Work” over the last 13 years or so, and here’s the data.
Just so we’re all on the same page about these multiplier returns – In 2009, the publicly traded Glassdoor Top 20 Places to Work stock prices outperformed the overall market by more than three fold.
The Top 10 outperformed by more than five fold.
You can see now how these companies’ stock prices have moved in relation to the stock market every single year throughout the last decade. 2021 was the first year in many that they lagged the market.
We can also see that if you invested $1,000 equally into the Top 20 and Top 10 rated companies throughout the last decade, you’d have more than doubled the returns of the broader stock market.
Over 13 years:
The top 20 best places to work returned 2.1X the S&P 500
The top 10 best places to work returned 2.2X the S&P 500
53% of these 260 picks have been beating the S&P 500
93% of these 260 picks have delivered positive returns.
It’s amazing to see how these picks outperform the market over a one, two, three, and five year time span. No matter how you look at the data, the outperformance remains consistent – about 2X the market.
Best Places to Work 2022:
Now that you have seen the data, I’m going to list Glassdoor's 2022 list with Wall Street's expected 12-18 month price target beside it.
Nvidia (NVDA) — $335 / share
HubSpot (HUBS) — $831 / share
Box (BOX) — $30 / share
Google (GOOG) — $3,366 / share
Lululemon (LULU) — $440 / share
Salesforce (CRM) — $328 / share
Royal Caribbean Group (RCL) — $94 / share
Five9 (FIVN) — $196 / share
Twilio (TWLO) — $410 / share
Adobe (ADBE) — $665 / share
Akamai (AKAM) — $130 / share
Delta Airlines (DAL) — $52 / share
Rivian (RIVN) — $135 / share
Autodesk (ADSK) — $327 / share
ServiceNow (NOW) — $745 / share
DocuSign (DOCU) — $200 / share
Microsoft (MSFT) — $375 / share
Intuitive Surgical (ISRG) — $355 / share
Southwest Airlines (LUV) — $56 / share
Block (SQ) — $265 / share
At the end of the day, data and patterns are just that – data and patterns. I have no idea if the above listed companies will outperform the stock market for the coming 3-5 years — historical patterns are not indicative to future results.
It’s important, however, to include every data point possible when conducting research. I plan to keep this in mind going forward.
Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.